Australian consumer confidence falls for 9th straight month

An Index of Consumer Sentiment for Australia, published by Westpac with the Melbourne Institute dropped by 3.0% in the month to August. That is the ninth monthly decline in a row as consumers fret about the pace of price rises and the threat of further interest rate hikes from the Reserve Bank of Australia. The index now stands at 81.2 and that is the worst reading since August 2020. Of greater concern is the estimate of economic output for the year ahead, which fell to 73.9. On both of these indices, the breakeven between positive and negative sentiment is 100. Interestingly, as this was an expected outcome, the Aussie dollar only slipped a little but it perhaps has further to fall. The GBPAUD exchange rate is up to AUD 1.7335 this morning and many are expecting the AUD to fall behind as US interest rates and perhaps others rise faster than the Aussie base rate.

USD retains strength ahead of productivity and labour costs data

Although the GBPUSD rate started Monday looking like it would rise, it ran out of steam around $1.2140 and this pair is back down to $1.2080 this morning. This afternoon’s US data includes non-farm productivity and unit labour costs (sorry, I can’t bring myself to spell labour without the ‘u’. I know that vexes some American readers). This data could stall the USD’s gains though because we are expecting another slide in productivity, which has been trending lower for a couple of years. We are also expecting another 9.5% to be added to labour costs, a trend that has been upwards for a while. Rising costs and falling productivity don’t automatically bring to mind the need for higher interest rates but that is the Fed’s proclaimed path right now.

Sterling treading water ahead of Friday’s GDP data

There isn’t a lot to report on the GBP front. Traders appear to be sitting on their hands as they await the UK economic growth data on Friday. The GBPEUR rate is marginally lower at €1.1835 and the GBPUSD rate, having spiked yesterday, is down to $1.2080. The pattern is similar to other currencies. There is no tier one data from the UK today, so the hand-sitting is likely to continue.

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